New Mega-Bank Has Potential to Destroy Europe

A massive new European financial organizationcalled the European StabilityMechanism (ESM) is primed tobecome the region’s mega-bank, more powerful than even the European Central Bank.If all the euro zone countries ratify the ESMagreement, it will come to life on January 1, 2013.But in reality it is expected to cause mayhem for Europe, with Germany again being accused ofinitiating a financial war if they don’t pay thelion’s share of the ESM’s funding. Already politicians in many countries have started the “wehate Germany” chants.

Under the ESM, 700B euros will be collected from member countries into one big pot.Over the course of five years, members will beexpected to fork over 20% each year of the amount that is expected from them. At over 190B euros, the German contribution is by farthe largest. The second-largest contribution, of 140B euros, will come from France. Thismoney will then be loaned out to the neediest—at interest, of course.

How bankrupt member countries will be able to make the funding payments in the first placedoes not concern Brussels. If they can’t pay, theywill still get to keep their place at the ESM trough. Germans are concerned that they will beasked to make up the difference.

The Germans, who are still burdened by reparation payments, have not had a balanced budgetin the last decade and are effectively broke themselves. In 2011 alone, Germany paid out 562Meuros in reparations to the rest of the world.These numbers are not known by most Germans.

The difference here, however, is that the Germaneconomy is still strong and is expected torebound, unlike other European countries suchas Ireland, Greece, Spain, Portugal and Italy.